Nowhere to Go But Down

The candidates’ posters on the walls in my neighborhood in Tokyo have been up so long that their colors are fading. But it won’t be long until they are replaced by fresh portraits. Already the smiling face of brand new Prime Minister Taro Aso is appearing along with the slogan: “Aso Accomplishes!”

Japan is moving inexorably toward a general election, a potentially historic general election. Pundits still refer to it as a “snap” election as if it were coming as a surprise and as if the members of the House of Representatives, the lower house of parliament, were not already entering the fifth year of their five year term.

Both teams now have picked their champions for the coming joust. The Liberal Democratic Party (LDP) overwhelmingly chose former foreign secretary Taro Aso to replace Yasuo Fukuda in an interparty election held on September 22. Meanwhile, Ichiro Ozawa was re-elected without opposition for another term as leader of the main opposition, the Democratic Party of Japan (DJP).

The election might be called as early as November, after the Diet passes a special supplementary budget. The LDP’s coalition partner Komeito wants an early election, and the DJP, of course has been clamoring for one ever since they won control of the upper House of Councillors in July, 2007.

The LDP might want to take advantage of the “honeymoon” afforded a new premier to hold an early election, except that sobering polling suggests there won’t be a honeymoon. Fewer than 50 percent of voters approve of the new Aso government. That may be better than Fukuda at his lowest, but it is not encouraging for a brand new premier.

If Ozawa’s party gains enough seats to form a government it would be more than just an electoral victory; it would be revolutionary. Aside from a brief period in the early 1990s, the LDP has never been out of the government. Japan has never accomplished what Taiwan and South Korea have in a much shorter period of democratic rule, which is to oust the party long in power, and then to oust the challengers and put the other party back into office

But what constitutes victory for Aso’s LDP is not so simple. The problem for the LDP is that it won so many seats – some 70 percent of the 480-seat lower house – in former prime minister Junichiro Koizumi’s 2005 snap election that it is bound to lose many of them in the next election.

Just to give one example, Tokyo has 25 seats in the lower house. Of those, 23 are held by the LDP (having ousted ten Democrats in 2005), one by coalition partner Komeito, and only one is currently held by the opposition Democratic Party of Japan. How does the LDP improve on that?

Aso’s new party secretary general, Hiroyuki Hosoda has already lowered expectations. “The minimum goal is that the ruling coalition wins a majority to keep control of the government,” he said.

So before long pundits will come up with some arbitrary figure - call it “X” – for number of seats that the LDP can lose and still call the showing a “victory”. If the party lost more than X number of seats, it would be a “defeat”, and Aso might find his term as prime minister over before it had hardly begun.

The Tokyo figures point to a fundamental shift in Japanese politics. Many still mistakenly think of the LDP as a rural party, beholden to farmers and country interests, when it is becoming an urban party. But urban voters are fickle with only a shallow attachment to either party. The party hopes that Aso’s personal popularity will win votes among this floating electorate.

In recent years the DJP has made inroads into these traditional LDP rural strongholds. These were the voters who gave the DJP its astonishing victory in the 2007 upper house election. Ozawa will be cultivating the same ground in any general election.

The LDP leaders in the hinterland understand this and are running scared. That’s why the prefectural party members voted almost unanimously for Aso in the election earlier this month for LDP party presidency and prime minister, whereas his parliamentary colleagues scattered their votes among the four other candidates.

Aso spent much of the time he was out of office this year visiting rural parts of Japan, talking about the needs of Japan’s more depressed areas and need to stimulate the tanking economy. He wants to postpone certain other actions, such as raising the sales tax, until the economy is back on a stronger footing.

The party hopes that he can display some of Koizumi’s flair for political theater without hectoring party leaders about the need for structural reform. They needn’t worry; Aso is no Koizumi on economic issues. Structural reform is not part of his platform. (Koizumi is retiring from parliament and not running for re-election).

A former foreign minister, Aso is more interested in foreign policy issues than the domestic economy. He will likely try to suppress this inclination, since he knows that the Japanese electorate is overwhelmingly focused on the economy, pension funds and food scandals. The critical business community does not want to alienate China at this critical juncture either.

So the prevailing view is that the Diet will stay in session long enough to pass a $107 billion economic stimulus package initially proposed by the Fukuda government made up mostly of loan guarantees to small businesses before adjourning for an election.

It is doubtful whether Aso will try to push through another extension of the Indian Ocean refueling mission, whose authorization is set to expire in January, since there probably is not enough time to override any opposition or delaying tactics from the opposition-controlled upper house. And after the election he won’t have the votes to do it.

The reality is that in the next election Aso has nowhere to go but down (the only question is how far). But for Ozawa overturning the huge supermajority that the LDP now enjoys might be a bridge too far. The likely result: LDP returned but with sharply reduced majority

That is a prescription for more gridlock. The upper house will remain in opposition hands since it operates under a fixed election schedule and cannot be dissolved by the premier. The next election for half of the body won’t take place until July, 2010. Meanwhile the LDP will have lost the two-thirds majority needed to override its objections.

The Hong Kong Precedent

The unprecedented plan by Secretary of the Treasury Henry Paulson to intervene in the U.S. financial markets to buy up bad mortgages and other depressed holdings of America’s major financial institutions, brings to mind another famous intervention almost exactly ten years ago.

For two weeks in August, 1998, Hong Kong stunned the world by a massive intervention in the stock market. In the space of those fourteen days, the Hong Kong government spent $15 billion buying up stocks on the Hong Kong stock exchange, becoming in the words of one analyst, “the world’s biggest punter.”

The decision by the then finance secretary (now chief executive) Donald Tsang came against the backdrop of the Asian financial crisis that had broken out a year before and against an extremely weak property market in Hong Kong that had seen home values plummeting.

However, the precise circumstances that triggered the intervention were different from the U.S. A “cabal”, to use the government’s phrase, of international hedge funds was determined to exploit the peculiar synergies between the stock exchange and the mechanism for maintaining the Hong Kong dollar peg to the US dollar to make big profits.

Called the “double market play,” it involved dumping large quantities of the Hong Kong dollar, driving up interbank interest rates and depressing the stock market. Then the speculators profited on the declining stock market by selling stocks short.

The plan was perfect except that they made one miscalculation. They assumed that the Hong Kong government would sit quietly by and let the market take its course. In a sense they had swallowed perhaps too deeply the hype about Hong Kong’s unfailing dedication to the unfettered free market.

Tsang’s decision to intervene massively thus shocked everybody. Within two weeks the Hong Kong government had spent about $15 billion and owned about 15 percent of the publicly traded shares. This figure would be in the trillions of dollars in the US considering that Hong Kong has a GDP of about $50 billion and the US $13 trillion.

Many were aghast and condemned the intervention as an outrageous violation of free-market principles. The late Milton Friedman, who has long praised Hong Kong as the model for free markets, called the intervention “insane.” The government claimed that speculators constituted a conspiracy against the Hong Kong economy and said the move was necessary to “protect the broader financial structure” a phrase that sounds familiar these days.

After draining the reserves of about $15 billion, the government’s buying spree came to an end, but it succeeded in blocking the speculators. The Hong Kong dollar peg held, and the market over time regained its strength as the value of individual stocks, including those held by the government, rose.

There may be one major difference between Hong Kong then and the USA now, however. The assets that the government bought were basically strong. For a while it was the largest stock holder in the Hong Kong & Shanghai Banking Corp, the territory’s largest bank. Later the government sold off its large stock holdings at a profit.

Chicken Soup for the World

The year was 1958. Toshiro Mifune was starring in the samurai epic The Hidden Fortress and Godzilla was stomping his destructive way across Tokyo. Japan blew everyone away in the 3rd Asian Games (mainland China not invited), and Momofuku Ando sold his first package of Chikin (chicken) Ramen.

In the pantheon of great 20th century Japanese innovations instant ramen noodles might not rank up there with the transistor radio or the Walkman, but in many ways it may be Japan’s most influential invention.. Indeed, it has sometimes been called Japan’s greatest post-war invention, just ahead of the karaoke machine.

Ando introduced the world to instant ramen noodles in1958. In 1971 he rolled out Cup Noodles, the friend of the college student the world over, to even greater success. The little white polystyrofoam cups with the red lettering on them are today as ubiquitous on supermarket shelves as Coca-Cola.

The Nissin Food Products Corp which Ando founded has been growing at a steady 10 percent a year for the past seven years. Last year it earned a little more than $3 billion in sales. Despite some efforts at diversification, the company still earns 80 per cent of its income from sales of Cup Noodles and instant ramen noodles.

The largest market outside of Japan is greater China, including Taiwan and Hong Kong, where Nissin sells more than 40 billion servings or roughly half of international sales. Russia, the U.S. and Brazil are also big noodle customers.

Ramen is more than just a cheap bowl of noodles. It is, in essence, Japan’s national dish, cheaper than sushi, available everywhere and perpetually fashionable. Originally from China, the dish took off with Japan’s extraordinary economic expansion beginning in the late 1950sfueling an army of salarymen.

The basic (ie non instant) ramen is a bowl of wheat noodles sitting in a hot broth, flavored with soy sauce, bamboo shoots, a slice of pork and garnished with a piece of dried seaweed. But variations are endless, and many regions in Japan offer their own localized versions.

Instant ramen comprises an imperishable brick of dried noodles to which boiling water is added to soften them and bring out the flavor. As with the original, it is usually chicken-based. “It’s convenient, plus it is inexpensive,” says Syuji Yamashita of the Japan food Analysts Association.
An immigrant from Taiwan and a struggling businessman, Ando grew obsessed with the idea of inventing a quick-to-prepare dinner made from readily available wheat flour noodles, and he began experimenting in his back shed.

Watching his wife prepare tempura, he realized that dunking freshly cooked noodles in chicken soup before flash-frying them in palm oil would enable the water to leach out while preserving the flavor of the broth. The brick of noodles would be ready to eat after just a few minutes in boiling water.

After months of trial and error experimentation to perfect his flash-frying method, Ando introduced his first package of precooked noodles, called Chikin Ramen, on August 25, 1958. He was 48 years old (Ando died in January 2007 at the age of 96; his funeral was arranged by a former prime minister, Yasuhiro Nakasone.)

Oddly enough, the first instant noodles were considered something of a luxury food. Priced then at about 35 yen, a package was roughly five times expensive as a traditional noodle dish one could buy at a food stall. Now, of course, it is an economy item. As of 2007, Chikin Ramen sold for around 6o yen (60 cents), slightly double the original price. A bowl of ramen in a restaurant can cost $800 yen ($8.00).

The invention of Cup Noodles (when Ando was 62 years old) required more inspiration than perspiration. Ando had observed how Americans ate noodles by breaking the noodle brick in half, putting it in a cup and dousing it with hot water, spooning the noodles out with a fork rather than chopsticks.

Ando simply standardized the practice by providing a waterproof polystyrene container. Eating the noodles would then be as simple as opening the lid, adding hot water and waiting a few minutes.

Japan has museums for everything you can imagine, so it is hardly surprising the ramen has its own establishment –actually more of a theme park - in Yokohama. Two floors are given over to a typical Tokyo street at dusk. The year is, naturally enough, 1958, that seminal year in noodledom.

One enters through a railway station gate, the ticket taker chanting and snapping his punch, like the kind that has all but disappeared from modern railway stations. The darkened alley is lined with cubby-hole bars (some real), and a movie house with a posters of Godzilla and Toshiro Mifune.
For an hour or so the visitor is transported back to a time before the arrival of McDonalds, Kentucky Fried Chicken or even conveyor-belt sushi, and for many young Japanese visitors it is a time as distant and quaint as Mainstreet U.S.A. at Disneyland is for Americans.

The real draw, of course, it ramen, There are half a dozen or more ramen noodle shops, each one featuring a particular style ranging from Kyushu to Hokkaido and selected from more than a thousand shops throughout Japan. Lines of people stretch as visitors plunk down their ticket and take a seat around the crowded counter to receive their heaping bowlful.

At the Sixth World Instant Noodles Summit in Osaka earlier this year – yes, they have such confabs, earlier ones have been in Bali, Bangkok and Seoul - the conferees loudly proclaimed their product to be an “earth food,” and as chicken as its flavoring base, it is readily acceptable in all corners of the world. Hindus may not eat beef and Muslims may not eat pork, but there is not a single culture, religion or country that forbids the eating of chicken.

“Global consumption of instant noodles reached 98 billion servings in 2007, and we have already begun our countdown toward achieving our 100 billionth serving in 2008,” declared the conference in an official statement.

“At the same time, we hereby propose that the use of raw materials for food should take precedence over the use of raw materials for energy. There can be no higher priority than providing safe nutritious food to all the people of the world who need it.”
In other words, Chicken soup for the world.

The Unhappy Warrior

Yasuo Fukuda never looked happy during his year as prime minister of Japan. Whenever he appeared on television, he usually had his face fixed in a grim mask. One has the impression that his decision to resign was a kind of personal liberation.

Of course, Fukuda had a lot to feel grim about during his tenure. The economy is starting to tank, the government is deadlocked because the opposition Democratic Party of Japan (DJP) won control of the upper house of parliament and is in a position – not to mention eager – to obstruct and delay.

Moreover, the country is moving inexorably toward a general election, where the only possible outcomes are either victory but with sharply reduced number seats in the House of Representatives, or lower house of the Diet, or outright defeat for the first time in Japan’s post-war history – not exactly happy prospects.

Of course, the unprecedented situation of a divided Diet would have taxed the abilities of a politician with considerable more skill and cunning than Fukuda displayed. The trouble is that Fukuda acted as if he had been unfairly dealt a bad hand of cards and that a divided parliament was somehow against the natural order of things rather than being the normal workings of a democracy with a bicameral legislature.

This could be seen in the way he handled the appointment of a new head of the Bank of Japan, which required ratification by both houses. When his first choice was rejected by the upper house for being a high ministry of finance official, he turned around and appointed another -- with the same results. Then he complained about it.

His resignation was of a piece. The abrupt announcement at his official residence late Monday evening was rambling and a little self-pitying. “The opposition caused a lot of trouble for me in a divided Diet,” Fukuda told the news conference. “Piles of problems such as political funds, pension records, Hepatitis C and defense ministry scandals emerged one after another. I was swamped trying to resolve such issues.”

So the LDP is now preparing to choose on Sept 22 a new prime minister, who will be, amazingly enough, the fourth Japanese prime minister since the last general election was held four years ago under ex-premier Junichiro Koizumi (remember him?).

Fukuda’s obvious successor, of course, is Taro Aso, who ran against him for the post a year ago and lost. Ever since, he has been the unofficial prime minister-in-waiting. When in August Fukuda reshuffled his cabinet in a bid to boost his dismal approval ratings, he named him Secretary-General of the LDP, the number two party post.

Although Aso is the obvious frontrunner, three other LDP legislators are running: Yuriko Koike, who would become Japan’s first woman prime minister, Nabutero Ishihara, son of the governor of Tokyo and Yosano Kaoru.

Aso is another blue-blood. He is the grandson of former prime minister Shigeru Yoshida. He is also related to the Imperial family, as his sister married prince Tomohiko, a cousin of Emperor Akihito. (If elected he would be the third Japanese premier in a row who is the descendent of a former premier). His family owns extensive mining interests in Kyushu.

But Aso has a common touch. He is a devotee of Japanese cartoon books, known as manga, and Japanese anime, and is happy to make what some might consider a low-brow interest known to the public. His nickname is Rozen Aso, after a manga character.

This and a reputation for blunt speech make him probably the most popular LDP politician in Japan. It is little wonder that many of the wheelers and dealers of the LDP have been quietly pushing his candidacy to the forefront in hopes of having a leader with a little more charisma head the party in the next election.

The rest of Asia will undoubtedly look on the prospect of an Aso administration with some trepidation. They remember him as foreign minister under Koizumi, when relations between Japan and China hit a nadir over the premier’s official visits to the Yasukuni Shrine in downtown Tokyo.

Aso trumped that by loudly suggesting that the Emperor himself should pay his respects to the shrine which is dedicated to the soldiers and sailors who lost their lives in Japan’s foreign wars but also includes names of Class-A war criminals. Emperor Hirohito stopped making visits after they were enshrined in 1978.

But Aso has been re-inventing himself. After his defeat by Fukuda a year ago, he declined offers of cabinet posts and began an extensive tour of Japan. Once defined as a foreign policy hawk, he immersed himself in domestic issues, such as care for the elderly and the plight of economically depressed areas of Japan.
One can say that he has fully assimilated the mistakes of the former prime minister Shinzo Abe whom he also served as foreign minister, in overemphasizing nationalistic/conservative issues, such as changing the constitution, over bread and butter issues. That emphasis led to the opposition’s devastating win in the upper house election and continuing expectation that the DJP may win in a general election.

The first order of business for Fukuda’s successor will be extraordinary session of the Diet beginning in mid-September (assuming it isn’t postponed because of the resignation). The Diet is being called to deal with Japan’s rapidly deteriorating economy and renew once again the authorization for Japan’s navy to conduct refueling operations in the Indian Ocean.

One can say confidently that whatever Aso or anyone else wants, the controversial refueling operation is soon to be history. The legal authorization expires in January, and there is not enough time left to pass a reauthorization bill, assuming that the opposition uses its majority in the upper house to delay things.

After the special Diet session, Japan could be embroiled in a general election, one held as soon as late December. The outcome of that election will make it almost certain that no further authorization for the refueling operations will be approved for a long time.